Car ownership is no longer essential for the French. For the first time in 2022, more than one out of two vehicles registered in France was acquired under long-term rental (LLD) or with option to purchase (LOA). Or 52.4% of total sales (individuals and businesses combined) compared to around 30% in 2018, according to the firm NGC Data specializing in automotive data. “Rental formulas have become established on the private market for the long term to finance new vehicles, but also used cars”, recalls Christophe Michaeli, director of automobile mobility at BNP Paribas Personal Finance. According to him, car leasing “for everyone” really took off in 2015 when Renault launched its EasyPack offer without contribution with maintenance included. “An offer that popularized this method of financing before being taken up by other manufacturers. “Currently, 70% of new vehicles ordered by private customers are financed, most of them in LOA (LLD and credit remaining in the minority), according to the French Association of Financial Companies (ASF).
The success of leasing can be explained above all by the need for households to monthly pay their expenses to better manage their budget, such as telephone packages or energy bills. Lease contracts offer additional services to which the owners are not entitled, such as vehicle maintenance and sometimes also insurance. They also bring a certain flexibility, as with the LOA which makes it possible to buy back the vehicle at the end of the lease at a price fixed in advance. The only drawback is that the return of the vehicles can lead to more or less significant repair costs, depending on the damage and degradation suffered. Because in the context of a leasing, the tenant remains responsible for his car and may have to pay the cost of repairs.
Limit the effect of inflation. The economic context is very favorable to rental. The price of new vehicles has increased by 15 to 20% in recent years, to the point of excluding many candidates for cash or credit purchase. “In the case of a rental, rents can more easily mitigate the effect of inflation,” explains Christophe Michaeli. The rise in prices also affects second-hand vehicles, which depreciate less quickly than expected and their resale price (their residual value) on the market therefore tends to increase. “Especially if they are well-equipped and motorized models, such as gasoline or hybrids with a Crit’Air 1 sticker and able to operate in low-emission zones (ZFE).
Rental solutions, however, are not immune to inflation and are subject to rising interest rates. There was even a slowdown in the first quarter on leasing contracts with a decline of one point to 51% compared to the same period last year. “While in 2022 we witnessed a shift in vehicle financing solutions for individuals in favor of rental financing, the recent rise in interest rates seems to be reshuffling the cards slightly and could ultimately penalize leasing” , indicates the firm AAA Data. In this context, all players (builders, lessors and other distributors) tend to extend the duration of contracts, from 36 to 48 months, in order to limit the increase in monthly rents for their customers.
25 %
sales of used vehicles financed by leasing (LOA or LLD).
52.4%
total sales of vehicles financed through long-term leasing (LLD) or with option to purchase (LOA).
60.3%
of vehicle sales are financed in LLD in company fleets.
70%
new vehicles ordered by individual customers are subject to financing (LLD, LOA or credit).
An offer for companies. In corporate fleets, long-term leasing (LLD) is emerging as the most appropriate solution. It represents 60.3% of sales, up 11.2% in the first quarter compared to the same period in 2022, according to the union of long-term rental companies Sesamlld. An increase sustained by the rise in the price of new buildings but also by the diversification of rental offers. Manufacturers and rental companies are banking on new solutions such as medium-term rental (LMD) or the rental of used vehicles. These two formulas, which are based on cars available from stock, make it possible to counter both the soaring prices of new vehicles and increasingly long delivery times. The LMD has the advantage of flexibility: it allows for example to test an electric vehicle for a few months without commitment, to be sure that it is suitable for its uses. But also to have a vehicle while waiting for the delivery of a new model, or to provide a car to an employee for a limited period, the time of a fixed-term contract or a temporary contract, for example.
As for the rental of used vehicles, it is the best way to lower monthly costs by taking advantage of a model that is still recent. This formula already represents a quarter of used vehicle acquisitions, according to the ASF, up 18% over the last twelve months (against 7% for credit). It should continue to progress with the rise of electric cars which, because of their higher purchase price, lend themselves particularly well to leasing and re-leasing. Models likely to experience several rental cycles during their life, before ending up on the second-hand market.
Consult our file: Vehicle fleets
ALFA ROMEO – RENAULT/SP – BMW/SP – PEUGEOT/SP – TESLA/SP
